Recent New Jersey Insurance Decisions

Monthly Archives: April 2015

In an unpublished decision, Judge Barry P. Sarkisian, of the Superior Court of New Jersey, Hudson County, held that the continuous trigger applied in a construction defect case involving a claim for coverage under a commercial general liability policy. Because the policy at issue went into effect after the damage manifested itself, the court also held that there was no coverage under the policy. A copy of the decision, Cypress Point Condominium Association v, Selective Way Insurance, No. HUD-L-936-14 (N.J. Super. Ct. March 30, 2015), is available by clicking on the link below.

Trigger is used to describe “the event or events that under the terms of the insurance policy determines whether a policy must respond to a claim in a given set of circumstances.” Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 447 (1994). Under the continuous trigger theory, coverage potentially is available under all insurance policies that were in effect from the time that the damage first started to occur until the manifestation of the injury or damage. Insurers that issued policies that were in effect after the manifestation of the injury have no liability, even if the injury progresses or gets worse during their policy period. Polarome Int’l, Inc. v. Greenwich Ins. Co., 404 N.J. Super. 241, 265-68 (App. Div. 2008), certif. denied, 199 N.J. 133 (2009). The continuous trigger applies in cases involving progressive indivisible injury or damage. See, e.g., Prolerized Schiabo Neu Co. v. Hartford Acc. and Indem. Co., 990 F. Supp. 356, 363 (D.N.J. 1997).

Application of the continuous trigger doctrine has, for the most part, been limited to cases involving exposure to asbestos, toxic tort, and environmental contamination cases. See Langan Engineering and Environmental Services, Inc. v. Greenwich Ins. Co., 2008 WL 940803, *5 (D.N.J. April 7, 2008). In such cases, it can be difficult, if not impossible, to determine precisely when the damage occurred. In environmental contamination cases, for example, the acts or practices giving rise to potential liability often occurred decades ago. The continuous trigger theory is a judicially-created methodology that was adopted by the New Jersey Supreme Court to address such complicated causation issues.

The Cypress Point decision is one of the first decisions applying the continuous trigger outside the toxic tort/environmental damage context. Cypress Point arose out of the construction of a condominium complex. Construction took place from 2002 to 2004. The unit owners began experiencing problems with water infiltration shortly after moving into the units. The condominium association subsequently sued a number of the contractors involved with the construction of the complex.

MDHA Framing was one of the subcontractors that worked on the project. However, it was not one of the contractors initially sued by the association. MDHA was added at a later date after the association’s liability expert opined that the water damage was the result of MDHA’s negligence. The expert’s first report was dated June 30, 2012. The expert issued a subsequent report on February 8, 2013, and prepared a certification dated February 2, 2014.

The policy in question was issued to MDNA in August 2012, approximately eight years after MDNA had stopped working on the project. Thus, it was not in effect when the work was actually performed by MDNA. It arguably was in effect, however, during the time that some of the damage occurred.

In Cypress Point, the court held that manifestation of the injury or damage took place prior to the time that the policy in question went into effect in August 2012. As noted by the court, the unit owners began to experience water infiltration issues shortly after moving in to the units in 2004 and the association’s expert found substantial water damage no later than June 30, 2012, the date of his first report. In addition, the association sued certain contractors in June 2012 seeking recovery for damage caused by faulty construction. Thus, the court concluded that the damage manifested itself prior to the date that the policy at issue went into effect and, therefore, there was no coverage under the policy.

In the Cypress Point decision there is little information concerning the exact causation of the damage or when it occurred. In addition, there is no discussion as to whether there was a progressive, indivisible injury to the property. Thus, it is not clear whether the case was a good fit for application of the continuous trigger theory. It did appear, however, that coverage would have been barred regardless of what particular trigger was applied, and by applying the continuous trigger the court gave the association every benefit of the doubt. Thus, by concluding that there was no coverage, the court reached the correct result, although its rationale for doing so is subject to question.

As noted, the Cypress Point decision is unpublished. Under New Jersey law, unpublished decisions may not be cited as legal precedent pursuant to Rule 1:36-3 of the New Jersey Rules of Court. The decision is nonetheless important because it illustrates how a New Jersey court is likely to rule when faced with similar issues. Indeed, while such decisions are not binding, other courts often find such decisions persuasive and can rely on the reasoning of such decisions – without citing them — in fashioning their own decisions.